To give you a great browsing experience free of charge, this site uses cookies. Cookies help us personalize content and ads, provide social media features,
track your preferences, and analyze traffic. Forbes may share this information with its advertising, analytics, and social media partners, who may use it
with information you have provided to them in connection with their services.

Microsoft Buying EA For Xbox Wouldn't Make Any Sense

Yesterday, Polygon ran a lengthy piece about the struggles of the Xbox brand to produce must-have exclusives while its rivals, Sony and Nintendo, continue to shine that area. Microsoft acknowledges this problem (unlike many of its most die-hard fans, I might add), but it will take some time to fix it, as these kinds of games take years to develop.

But what if they didn’t?

One idea the piece puts forward is that Microsoft may be in the market to acquire other publishers to expand their games roster instantly. The Polygon piece says a “reliable source close to Microsoft” told them Electronic Arts itself has recently been considered for a purchase, and everyone took off running with that rumor.

This has resulted in a number of breathless gasps among the community (and even a tick up for EA stock), but before that gets too out of control, it should be noted that A) the idea of “looking into” an acquisition like this is not terribly unusual and B) in this specific instance, it’s probably not going to happen for a number of reasons.

The points in favor of this idea seem to be just:

Microsoft is a big company with a lot of money

Big companies buy other big companies all the time

Microsoft already has something of a relationship with EA

Microsoft can buy EA and make all its games exclusives, giving the Xbox a huge leg up

Ehhh not so fast. First of all, this rumor ignores the fact that a company like Microsoft is probably looking at a zillion other companies, large and small, for acquisition, so “considering” EA should not mean all that much, even if it’s the most recent place they might be eyeing.

Secondly, for EA specifically, this doesn’t make sense for a number of reasons. I asked Wedbush analyst Michael Pachter to explain.

“The reason Microsoft would have trouble buying a publisher is that the publishers make more money on the PlayStation platform than on the Microsoft platform,” Pachter told me. “At best, a purchase of EA would allow them to capture 60% of net income, and likely far less, so it wouldn’t pencil out financially. This might have made sense back in 2001 (when Xbox launched), but at these prices, it’s hard to justify. Also, keep in mind that more than half of EA revenue is licensed, so Disney and FIFA might not be happy if sales of their games were cut in half.”

Battlefront 2EA

Pachter goes on to say he doesn’t think there’s a chance this happens, and if anyone bought EA it could be someone like Disney or Amazon looking to get deeper into the games business, but it wouldn’t be Microsoft.

So, because a huge publisher like EA would not want to go from selling games on 100 million+ consoles between Xbox One and PS4 to just ~35 million or so on Xbox One if Microsoft suddenly made all their games exclusives, that would be a tough sell. And the licensing issue is key as well. Imagine being unable to play FIFA on PS4. The world would riot.

Microsoft could pull a Mojang and like Minecraft, allow the games to continue to be multiplatform after the purchase. But in that case, why bother with the purchase at all if the entire point is to try to bolster your exclusive games line-up?

A more logical purchase would be for Microsoft to scoop up talented developers, not entire enormous publishers, like the way we recently saw EA fully acquire Respawn. Nintendo makes most of their best exclusives in-house while Sony has cultivated its own developers for years now. The point is, this is a lengthy process for which there are probably few shortcuts. Microsoft needs to put the work in, and maybe in a few years we’ll see a solid yield from investment today.

I suppose we should never say never when it comes to EA and Microsoft, as stranger acquisitions have happened, but it really doesn’t make all that much sense for either party, and I would not expect it to come to fruition. Microsoft will likely have to solve this problem some other way.